Bribery Act 2010 – next steps

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Introduction

The Ministry of Justice recently published its long awaited guidance on the practical implementation of the Bribery Act 2010 (the “Act”) for commercial organisations (the “Guidance”). The Guidance offers comfort on several fronts to firms of all sizes and introduces a concept of proportionality that will particularly benefit smaller firms. In this note we examine the areas where the Guidance has provided much needed clarification, some of the practical steps that firms should be taking in light of the Guidance and ahead of the revised implementation date of 1 July 2011 and specific areas where Throgmorton may be of assistance.

The Act creates a strict liability offence for commercial organisations that fail to prevent bribery by persons within the organisation or by a person associated with it. The Act does not set out specific criteria as to what constitutes a bribe but rather concentrates on the intent/effect of any particular activity. Generally, if something is done by a person to induce another to improper performance of their job then that person is likely to be committing an offence under the Act. The Guidance makes it clear that in order for a commercial organisation to have committed an offence of failing to prevent bribery an initial offence of bribery must first have been committed (although not necessarily prosecuted). The Act offers commercial organisations a defence to prosecution in the event they have taken ‘adequate procedures’ to prevent bribery and the Guidance focuses on this defence as well as the general application of the Act to commercial organisations. 

Practical Steps

The initial step for any firm will be to carry out a risk assessment to understand the risks of the firm, or any associated person, being involved in bribery either as an offeror or offeree of a bribe. The Guidance concedes that smaller organisations that cannot reasonably be considered to be at risk of being involved in bribery may not need to put any procedures in place.

Any risk assessment should be considered and approved by the board and then documented. Once assessed, adequate and proportionate bribery prevention procedures should be put in place and again it would be sensible to document the procedures to be adopted. The procedures could include any (or all) of the following:

  • amending the firm’s hospitality, gifts, promotional expenditure, charitable donations and political donations policies (or drafting some in the first place);
  • providing training to employees and/or third party agents on the firm’s policy on bribery prevention;
  • reviewing employment contracts or employee handbooks to include disciplinary provisions in the event of breaches of a firm’s bribery prevention rules;
  • reviewing and potentially enhancing financial and reporting controls such as adequate bookkeeping, auditing and approval of expenditure;
  • reviewing standard term contracts with third parties to include anti-bribery provisions;
  • ensuring appropriate ‘whistle-blowing’ procedures are in place for employees to utilise;
  • publishing a statement on the firm’s website regarding its policy on anti-bribery and including such a statement in any tender documents that are produced; and
  • considering and documenting the extent of any due diligence that needs to be carried out in respect of potential suppliers.

FSA authorised firms and interaction with the US Foreign Corrupt Practices Act

Firms that are regulated by the FSA will already have procedures in place regarding gifts and benefits and conflicts of interest. In many circumstances this will include a register of corporate hospitality events attended or hosted. Any policy or record sheet in respect of gifts and benefits is likely to prove a useful element of any anti-bribery policy but firms should be wary of simply relying on this in order to utilise the defence of adequate procedures. If a firm does wish to avail itself of the defence it should as a minimum be able to demonstrate that it has considered the risks even if the outcome is only minor changes to its existing policies and procedures.

Firms that have procedures in place which are compliant with the FCPA should also be cautious in assuming that they will automatically be able to use the adequate procedures defence. There are several differences between the two pieces of legislation and any training or policy written for the purposes of the FCPA may approach the issues from differing angles. As a minimum any existing policies should be reviewed from the UK Act perspective. 

Clarification

The Guidance has also provided helpful clarification in a number of key areas:

Carrying on business in the UK

The Guidance applies a common sense approach to the question whether a non UK organisation can be regarded as carrying on a business or part of a business in the UK. This approach means that an organisation which does not have a demonstrable business presence in the UK would not be within the scope of the Act. Furthermore, the Guidance suggests that having a UK subsidiary will not, in itself, mean that a non UK parent company is carrying on business in the UK, since a subsidiary may act independently of its parent or other group companies.

Hospitality

The Guidance recognises that bone fide and reasonable hospitality and promotional or other business expenditure which intends to promote the image of an organisation or to market or present its products and services or establish cordial relationships is lawful under the Act. In his forward to the Guidance, Ken Clarke confirms that ‘no one wants to stop firms getting to know their clients by taking them to events like 
Wimbledon or the Grand Prix’. However, where the payment, gift or hospitality is extraordinary or lavish this may leave an organisation more exposed to potential prosecution.

Associated Person

A firm will commit an offence if a person “associated” with it bribes another person. There was a concern that a firm could be held liable for the actions of a contractor several links down the supply chain but the Guidance suggests that in most cases an associated party is only likely to be the party with whom a firm has a direct contractual relationship although this will depend on the facts of each particular case.

How can we help?

We would be happy to discuss any concerns you might have in respect of the Act or the Guidance. We would expect our clients that operate within the regulated sector to be at the lower end of the spectrum of risk given the nature of their business, the number of employees and operational size of the organisations. However it seems likely to us that you should be undertaking the following, all of which we can assist with, prior to 1 July 2011:

  • considering the bribery risks applicable to your organisation either by way of separate report which is then considered by the board or directly at board level. This assessment should include any risks that your firm might be subject to through its associated persons;
  • communicate the board’s policy on anti-bribery to all employees and identify any particular risks that have been highlighted. This could be done via an intranet, email or through a short presentation;
  • review the firm’s hospitality and donations policy (or draft one) and tie this into the expenses process used by the firm so that any out-of-the-ordinary hospitality expenditure or donation is automatically identified to the relevant person;
  • amend the standard terms of employment and any employee handbook to take account of the firm’s anti-bribery policies, including the addition of any ‘whistle-blowing’ policy; and
  • publish a statement on the firm’s website regarding its policy on anti-bribery.

It may of course be that particular medium or high risks are identified as a result of any risk assessment and we would be happy to discuss any specific areas of concern for clients or non clients alike.

 

Adam Hewitson
19 May 2011


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About Throgmorton: Throgmorton is one of the leading companies specialising in the provision of financial and administrative outsourcing in the UK SME financial services sector.

The information in this notice is intended for general guidance only. Throgmorton does not accept any responsibility for losses incurred to any person acting or refraining to act as a result of the information in this notice. Advice should be taken in the context of specific circumstances.